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Economic news: Fed’s Waller on Tariffs and Rate Cuts

Economic news: Fed’s Waller on Tariffs and Rate Cuts

Economic news: Federal Reserve’s Waller on Tariff Impact and Possible Rate Cuts

Recent updates in economic news include Federal Reserve Governor Christopher Waller’s comments on June 2, 2025, regarding tariffs and monetary policy. He noted that tariffs under the Trump administration may cause short-term inflation pressures, but he remains open to potential interest rate reductions this year.

Temporary Inflation Pressure from Tariffs

Waller explained in Seoul that inflation increases caused by tariffs are expected to be temporary. He advocates treating these tariff effects as short-term influences when the Fed adjusts policy rates. He added that if tariffs stabilize near forecast lows and inflation steadily approaches the Fed’s 2% inflation target alongside a robust labor market, interest rate cuts in 2025 would be favorable developments.

Risks and Economic Outlook for 2025

Waller expressed a generally positive outlook on possible rate cuts, depending on economic conditions. However, other Fed officials maintain a more cautious stance. He noted that tariffs’ current economic impact is limited but could evolve. Risks in the latter half of 2025 include a potential economic slowdown, employment declines, and upward inflation risks. These largely hinge on ongoing trade policy developments.

Inflation Expectations and Market Concerns

While tariffs contribute to inflation, Waller believes their effect is temporary, with the largest impact expected in late 2025. He also pointed out that the risk of significant new tariffs has lessened. He highlighted that some inflation concerns stem from previously inaccurate assumptions about COVID-19-related price pressures, which no longer apply. Due to discrepancies in inflation expectation data, the Fed closely monitors market forecasts and expert analyses.

U.S. Treasury Yields and Foreign Investment Trends

Waller discussed rising U.S. Treasury yields, attributing them to increased government borrowing and cautiousness among foreign investors toward U.S. assets. Some messaging from the Trump administration appears to have discouraged foreign asset purchases, reducing demand from certain investors.

Conclusion: Fed Outlook and Trade Policy Risks

Federal Reserve Governor Waller regards tariff-driven inflation as a temporary issue and is open to supporting rate cuts in 2025 depending on economic developments. The outlook remains closely tied to trade policy progress, requiring ongoing monitoring. Stay informed with the latest Forex trading news and analysis. Visit our website now at: https://fixiomarkets.com/en/prex-blogs

Economic news: Fed’s Waller says tariff inflation is temporary and supports potential rate cuts within 2025.

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David Wilson
Author

David Wilson has extensive experience in currency and commodities trading. He began his career in metal sales and trading at Societe Generale in London. He went on to work as a senior analyst within the FX industry where he developed and refined his own trading and risk management strategies. Having a solid understanding of market dynamics, he founded his own research and asset management services and works with FIXIO to provide timely market commentary on the global financial markets.

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